The Wall Street Journal recently has added a "Greater New York" section that you outlanders don't seem to get. In this morning's version we find a report that yesterday our illustrious Mayor Bill de Blasio spoke at a breakfast forum in Washington sponsored by Politico. (The on-line Journal article is behind a paywall, but Politico has video here.) Of course, de Blasio took the occasion to advocate that if the Democrats want to recover and win in 2016, they need to get behind his "progressive" agenda, most particularly the fight against income inequality. And also, of course, that the person to lead this effort is Hillary Clinton.
The Democrat should be willing to challenge the status quo. . . . The Democrat should be willing to challenge wealthy and powerful interests and should marry that with a grass-roots organizing strategy that epitomizes the message. . . .
Now, do you think that Mr. de Blasio's interviewer from Politico, Mike Allen, would have thought to ask how he could possibly have any credibility on the income inequality issue when the highest measured income inequality in the country is right here under his nose in Manhattan? Needless to say, the issue did not come up, at least not in the portions quoted in the Journal article and not in the video that Politico has posted. That's what it means to have subservient house journalists -- you can be interviewed by them, secure in the knowledge that they will not ask any difficult or embarrassing question, no matter how glaringly obvious. Meanwhile, as I have pointed out here multiple times, a study of all Congressional districts shows that NY-10 has the highest "Gini coefficient" of all Congressional districts; and NY-12 is number 3. Mayor de Blasio's office, at City Hall, is in the NY-10 district.
So really, isn't it obvious to everyone with a pulse that New York's collection of policies makes income inequality worse rather than better, at least as measured by the most widely used metrics?
Over the past weekend, the New York Times published an article in its Real Estate section that unintentionally illustrated how this comes about. The article is titled "Divided by a Windfall," and describes the tensions that have arisen in a large Manhattan "affordable housing" complex from a proposal to remove the complex from the affordable housing program and allow the apartments to be sold on the free market.
Of course, "affordable housing" is de Blasio's favorite program above all others to address income inequality. Yet from all anyone can observe about the man, he seems to be completely unaware that affordable housing programs clearly and obviously increase measured poverty and income inequality. That's because the value of the rent saved by a low-income family through having a discounted rent is not counted as income. Here in Manhattan, many families get rent discounts of $50,000 per year, and some get discounts of over $100,000 per year, none of which counts in their measured income. Meanwhile, very sensibly, these people minimize their measured incomes by various means in order to qualify for these huge rent subsidies.
The project under examination by the Times is called Southbridge Towers. It's not one of the low-income NYCHA projects that I proposed giving away in my article last week, but rather falls under one of the many other wacky New York housing subsidy schemes, this one called the Mitchell-Lama co-op. According to the Times article, there are about 70,000 units of this type in New York (most outside of Manhattan). The basic deal was this: The state finances construction with tax exempt bonds. You apply in a lottery for an apartment, and if you win, you get your apartment for a steeply discounted price. (The Times gives the average price paid at Southbridge as $17,500.) Theoretically, you "own" the apartment; but when you sell, you must sell back to the co-op corporation itself, and the price must be exactly what you had paid, here an average of $17,500.
Of course, with a desirable downtown Manhattan location (in fact quite near de Blasio's office at City Hall), these apartments are now worth an average of over $500,000; some may even be worth $1 million. Can the residents cash in? Actually, it's specifically permitted after a fixed period of years, as long as they re-pay the state-subsidized mortgage and refinance it privately. So a proposal to do just that was presented to the shareholders at Southbridge, and passed in September.
A win-win you say? You don't understand official New York thinking.
“It’s a sad day for affordable housing in New York,” said John Fratta, 61, the only member of the 15-member Southbridge Towers co-op board to oppose the decision. “It’s really a tragedy.” . . . Mayor Bill de Blasio’s housing plan even suggests reaching out to former Mitchell-Lama developments to see if residents would consider returning to the fold.
Nobody in the article is actually able to articulate why exactly it is a "tragedy." This complex has 1,651 units, which means that at over $500,000 per unit, it's worth close to $1 billion. That's a billion dollars of value that has been locked away and prevented from entering the economy or anyone's income by brain-dead restrictions on resale. Now suddenly a billion dollars of income will be created out of thin air. Or, as the co-op board president who spearheaded the privitization put it:
“People of modest means now have an asset worth hundreds of thousands of dollars,” said Wallace Dimson, 68, the president of the Southbridge Towers co-op board.
And it's not just that they can sell the apartment. There are lots of other ways to monetize some or all of the value once market sale is allowed. For example, you can borrow against the value.
Well, it's not hard to see why de Blasio hates this privitization thing. The process makes it glaringly obvious how ridiculous the affordable housing program was in the first place.